Articles Posted inStudent loans

It’s difficult for laypeople (and sometimes bankruptcy attorneys) to believe there are legal options to reduce student loan debt after hearing for years that “student loans are nondischargeable in bankruptcy”. Well, this is not always true. They can be discharged – or partially discharged – and brand new payment terms set up.

Christie and her staff where very professional honest and straight to the point with my student loans! I was struggling with private loan monthly payments that I could not afford in which was affecting my credit.

I heard from a client today who attended one of our student loan seminars recently. Many of her colleagues in the military recently submitted their PSLF applications and are now starting to get back denials. Despite completing the ten years of payments while working full time for Uncle Sam, PSLF relief is being denied due to what amounts to loopholes. The most common reasons are they have the wrong loan types or wrong payment plans. So as I thought, many people still don’t know they have a problem!

Kathy wrote:

I cannot THANK YOU both enough for all the help and guidance getting my loans back on track for future forgiveness. It’s a huge weight lifted knowing that now I have an end date to look forward to!! 🙂 I will absolutely write a review for you and have been talking you up to my fellow vets in the same position as me. Quite a few of them recently tried to submit for loan forgiveness after 10 years of public service only to realize the same thing I did after your talk, Christie – that they did not have the correct loan type to do so. I hope they reach out and utilize your expertise.

I thought I’d take a few minutes to write a follow up to Jeff Gitlen’s informative piece on consolidation of federal student loans over on LendEDU.com.

As a student loan attorney, we have learned several tricks to take advantage of ways to reduce student loan debt while avoiding the traps in consolidation. Consolidation is often misunderstood as a way to reduce interest rates. Jeff emphasizes that this is not accurate, rather the loans remain at a market weighted average of what they were before the consolidation. But it is much more convenient to have one loan, with one payment and one servicer. Not only does it makes payment easier, it makes enrollment in income driven plans much simpler. Same with the annual certification of your proof of income – only one place to send your proof of income. One payment. Nice and simple.

But consolidation is much much more. You can actually change your loan type through a consolidation. Did you know that prior to 2010, 80% of all federal loans were the older Family Federal Education Loans (FFEL). And importantly, FFEL loans are ineligiblefor Public Service Loan Forgiveness. I know of LOT of people who didn’t know this and have loans outstanding from prior to 2010 – and they aren’t getting the relief Congress intended through the PSLF – people who are counting on their loans being forgiven after 10 years of public service. Consolidation of the FFEL loans to Direct loans would have fixed this problem that we’re now seeing in droves. A recent GAO report shows only 55 borrowers have qualified for PSLF to date due in large part to having the wrong loan type or in the wrong payment plan. Read about this more in this Student Loan Nightmare story focusing on two of our PSLF clients by ABC Action News.

I’ve been invited by the Tampa Bay Bankruptcy Bar Association to speak about student loan debt and what can be done – both inside and outside of bankruptcy. This is for the Consumer luncheon on the fifth floor of the federal courthouse if any local attorneys are interested in attending. You don’t have to pre-register, it’s free and there’s pizza! I’ve got lots to cover, some new things going on and the results are fantastic! Just check out our reviews and what our clients are saying!

This graph above should show why we have a problem with student loan debt – its tremendous growth even since the recession in ’08 is crazy.

Also, notice in the graph below, while our mortgage delinquencies are back to the lowest they’ve ever been, student loan delinquencies are the highest they’ve ever been — and more than credit cards, auto and mortgage debt.

When you contact your private student loan company, you likely will be told the only options are: 1) a payment amount that is much higher than you can afford, or 2) to make an interest only payment which makes no dent whatsoever on the loan balance. Stop that. Read below. Then call us.

Our latest Google review from Matthew:

My daughter and I contacted Christie last December regarding loans that I had cosigned for. Navient was unwilling to offer an affordable payment. They offered an interest only payment, and late payments were killing our credit. With Christies guidance we did exactly what she suggested and we were able to reach a settlement for around 30% with an affordable monthly payment.

Private loans don’t have any government programs like federal loans do – payments are not based upon income, there is no debt forgiveness and no protections for someone who becomes disabled and cannot work. However, they will settle. They key is to put them in the position of wanting or having to settle. How we do this is we help our client track consumer collection law violations.

How many times do they call you a day? Do they call your cell phone after you’ve told them not to? Do they call you at work after you’ve told them not to? Do they call before 8:00 a.m. or after 9:00 p.m.? Do they discuss your debt with third parties? All of that is potentially illegal under the FDCPA, FCCPA and the TCPA and provides us with leverage to settle a debt and ways to escalate the conversation to a decision maker with higher authority to negotiate a settlement.

The tax landscape for student loan forgiveness is constantly shifting. Earlier this year we blogged about disability discharges of federal student loan debt no longer considered taxable. Discharges in bankruptcy for either federal loans under a Brunner challenge or non-qualified private student loans that don’t meet the definitions for discharge protection are both non-taxable events.

The Public Service Loan Forgiveness program for federal loans also provides a tax free total forgiveness after ten years of qualifying payments. Talk to us if you have questions about whether your loans qualify, your employment qualifies, or your payments qualify. There are sticky questions that may prevent relief after years of payments if done wrong.

The IRS also allows for tax relief for taxpayers who took out federal student loans for attendance at Corinthian Colleges and other schools owned by American Career Institutes (ACI) and were granted a discharge under the Defense to Repayment program.

Just now, I got off the phone with a very sophisticated potential client who is facing a garnishment for his federal loans. This was a very intelligent person and well respected in his field, but he didn’t really know much about how the student loan system worked. His closing comment to me before we ended the call was “What a productive phone call!” I often hear “I wish I had called you years ago, I’d be that much further ahead”.

I mention this because due to high demand, we now have to charge for our student loan consultations – $175.

Matt Taibbi with Rolling Stone, wrote a recent piece called “The Great College Loan Swindle” that outlines how we got here. It started with sales pitches that colleges make to kids – comparisons of salaries of those with high school diplomas to those with 4 yr degrees. The value of that degree over a lifetime of earnings. Investing in yourself was a common phrase used by for-profit colleges. It creates a vicious cycle, everyone feels obligated to go to college, most everyone who can go does, and then you have a glut of graduates which is where we are now. And this isn’t limited to just the student. Parents wanting to help their kids every way they can, co-sign on loans they cannot possibly repay, or sign their own loans called Parent Plus loans. Parent Plus loans do not take into consideration the income and employability of the parent or grandparent who applies for the loan. Not surprisingly, Parent Plus loans have been cited by the CFPB as having extremely high default rates.

Florida is a state that allows professional licenses to be suspended for non-payment of federal student loans. We had a client who came to us last month after having her LPN license suspended. This is even worse than a garnishment. Rather than 15% of her wages being garnished, which is difficult enough for most clients, she’s receiving NO pay. And her job could be at risk if she is replaced.

It took 2-3 weeks, but we fixed her federal student loan default, got her onto an affordable income based plan and lifted the suspension order. Fortunately, our client was able to retain her job.

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